The US net lease market is experiencing a resurgence. Valuations reset throughout 2025, meaning the bid-ask spread narrowed. And in spite of economic headwinds, net lease volumes increased by 24% year-over-year for the fiscal year ending in Q3 2025, according to CBRE. For Michael Fitzgerald, managing director and head of US retail at W. P. Carey, finding the right retail investment opportunity starts with understanding some tell-tale signals.
"The US net lease retail environment is driven primarily by the general health of retailers," says Fitzgerald. "Are there a large number of retail operators that are opening new locations or investing in existing locations in a way where they need access to capital?"
When the answer to that question is yes, deal flow often follows, and Fitzgerald points to specific categories where he sees the strongest deal flow and investor interest right now.
Non-discretionary Categories Draw Investor Interest
Fitzgerald notes that retailers that sell non-discretionary products or services are among the most interesting for investors, but tend to carry lower cap rates. "We also think about the macro trends, such as fitness," says Fitzgerald. "It used to be something that a small percentage of the population would pay for; now it's become a non-discretionary spend for a lot of families because general health and fitness have become a priority."
He notes that convenience stores, car washes and automotive services are among the other segments he sees generating strong deal flow, with car washes having regained interest and automotive services drawing attention across the board.
Full Loan-to-Value Appeal Drives Demand
For business operators or CFOs seeking efficient forms of capital, Fitzgerald explains that the net lease structure is hard to beat. "They can redeploy that capital back into their businesses at a higher return because they're getting more loan-to-value than a mortgage," says Fitzgerald. "That's why we see sale-leasebacks continuing to be one of the top choices for businesses that have an ongoing need for capital."
When evaluating a net lease retail asset, Fitzgerald explains that the analysis centers on whether a location can generate enough cash flow to cover rent easily across a commitment that can run for 20 years or more.
He also notes that new stores can complicate that picture since there is no operating history to draw from, which is why assets with longer track records tend to be the easiest to understand and underwrite.
Net Lease Retail Holds Up Across Good Economies and Bad
Despite continued headlines about retailer store closures, Fitzgerald notes that the net lease retail market is more durable than the news cycle suggests. He explains that the net lease market has proved resilient across good and bad economies, with the most difficult periods coming not from downturns but from rapid interest rate swings in either direction.
"I'm optimistic about the net lease retail market. Even in times of relative instability, we continue to see consistent deal flow, as companies leverage sale-leaseback transactions to monetize real estate and fund growth," says Fitzgerald.
Visit W. P. Carey at ICSC Las Vegas, South Hall Upper booth 4438R.
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